Bamboozled: How old license plates can rack up new charges

When Linda Lobdell’s dad died in October 2012, she was tasked with cleaning out his home and managing his estate.

His car sat idle for many months, but Lobdell eventually transferred it to her name, and she used it instead of her own 1994 Honda Accord, which needed some costly repairs.

It was temporary. She planned to sell her Honda and buy a different car.

But car shopping wasn’t at the top of her list.

Working on her dad’s estate, running her small business and helping her mom — who was now living with her in Newark and had her own health problems — was taking up much of her time, she said. So when she finally sold the Honda, she didn’t buy a new car immediately.

She kept her license plates, saying she was a little sentimental after having them for 20 years. Lobdell said figured she’d use them on whatever car she purchased. In the meantime, she’d use her dad’s car.

But she was in for a surprise when she called her insurance company, American Commerce, to cancel the policy on the Honda.

“The insurance company person told me they couldn’t cancel the policy until I turned in the plates,” Lobdell said. “Mystified, miffed, disappointed, I accepted their word and continued having the monthly policy payments automatically taken from my checking account.”

She said she called the Motor Vehicle Commission to see if what the insurance company said was correct, and she said the rep said it was correct.

“I figured it wouldn’t be for too long, because I would soon buy a car, transfer the plates, and continue insuring two cars until I sold the Mercury,” which was her dad’s car, she said.

Time passed, and Lobdell received a renewal letter from American Commerce, and saw her premiums were set to go up significantly. That’s when she realized she needed to stop paying the Honda policy, she said.

She decided to surrender the license plates.

But no matter how hard she looked, she could no longer find the plates, she said.

She ended up contacting MVC to declare the plates lost, and she finally cancelled the Honda’s policy.

But the more she thought about it — that she had been paying for months of insurance on a set of license plates that weren’t attached to a car — the more it sounded wrong.

She contacted Bamboozled, not to ask for help in getting a premium refund, but to see if we had ever heard of this practice, and to warn others.

“I can’t imagine how this is legal, or necessary, and it surely makes no sense, since none of the eventualities covered by an auto policy can happen without steering wheel and tires and chassis attached to the plates,” she said. “What I really don’t get is how and why they can continue to charge insurance at all for a set of license plates that can’t hurt anyone.”

We put in a call to American Commerce.

While we waited for a response, we checked with MVC, which said it’s not an MVC rule.

“It’s actually up to the car insurance company. If they are requiring proof, that’s their doing,” spokeswoman Sandy Grossman said.

Drivers are supposed to surrender plates that are not in use, she said, but that’s really for a driver’s own protection. There are no penalties for not turning them in.

The Division of Banking and Insurance said it’s not aware of any insurance regulations that require license plates to be turned in when a policy is cancelled.

“If the policyholder no longer owns a vehicle, he or she cannot be required to continue to insure it,” said spokesman Marshall McKnight. “There is no longer an insurable interest in the vehicle.”

We also called Allstate and State Farm to see if they had a policy requiring proof that plates were turned in. They don’t.

And the Insurance Council of New Jersey (ICNJ), a non-profit advocacy organization representing 18 New Jersey insurance companies, said the practice is not an industry standard.

“In a state like Massachusetts, for example, the license plate itself is the proof of insurance, but not in New Jersey,” spokesman Chris Stark said.

After nearly two weeks, we finally heard back from MAPFRE U.S.A., the parent company of America Commerce.

Greg Clark, the company’s New York and New Jersey Regional Vice President, said in an email that the company does not comment on specific consumer matters, but it did have a general comment to make.

“It is not MAPFRE’s general practice in New Jersey to require an insured to provide proof of license plate surrender in order to cancel an automobile insurance policy,” Clark wrote.

He said the company only requires proof that a car has been sold where it is required by law, or in instances where the individual is seeking to cancel coverage retroactively.

“Our requirement for deleting a vehicle from a policy or cancelling an automobile insurance policy is to receive a signed request from the insured requesting this action,” he wrote. “This requirement would be consistent with the requirements of an independent agent that represents our company and provides protection to all parties that the action being taken is consistent with the insured’s request.”

Then he said that customer satisfaction is a priority at MAPFRE Insurance, so he’d personally be contacting Lobdell to address the matter.

That was on Dec. 10.

“I was interested to hear it’s not their policy, so somebody gave me wrong information. I would love if I could get some of money back. Isn’t that the fair thing?” Lobdell said. “If there’s a reason why in my case it was different, I’d like to hear it.”

On Dec. 12, Lobdell got a call from Clark, she said.

“He apologized that it happened at all,” Lobdell said. “He said his employee just made a mistake. He said they operate in 17 states. The headquarters is in Massachusetts and in that state and New York do require license plate receipts.”

Lobdell said then Clark offered her a full refund of her overpaid premiums, which came to $915.84. She said $600 would be applied as a credit so it would be used for the remaining payments on the current policy, and she’d get a check for the rest.

That’s great news.

Even though this ended happily for Lobdell, unless you plan to quickly put your plates on a new car, you should seriously consider turning them in.

“When you surrender your plates, Motor Vehicle marks it in the record that they were surrendered, and you get a receipt that you’re supposed to save,” said Grossman, the MVC spokeswoman. “If the plates are fraudulently used, you’d have proof that you are no longer associated with the plates.”

Otherwise, those pieces of aluminum could be very costly souvenirs.

Have you been Bamboozled? Reach Karin Price Mueller at Bamboozled@NJAdvanceMedia.com. Follow her on Twitter @KPMueller. Find Bamboozled on Facebook. Mueller is also the founder of NJMoneyHelp.com.